Ch 4 - The Portfolio Management Process

Question 1

7 steps of the portfolio management process

Answer 1

1. Determine investment objectives and constraints.
2. Create an investment policy statement.
3. Establish an asset allocation strategy.
4. Select securities.
5. Monitor the client and the markets.
6. Evaluate the portfolio’s performance.
7. Rebalance.

Question 2

3 components of asset allocation strategy

Answer 2

1. Strategic asset allocation.
2. Tactical asset allocation.
3. Rebalancing`

Question 3

Stepping Asset Allocation Strategy - What and why?

Answer 3

• Increase allocation to equities as investor becomes more confident
• Keeps investor from making emotional decisions over short-term losses

Question 4

age group and Emphasis of Mid Life Growth Stage

Answer 4

• 35 to 60

* Continued saving and long-term goals.

Question 5

Age Group and Emphasis of Pre-Retirement Consolidation Stage

Answer 5

• 55 to 70

* Preserve fund primarily. growing it is secondary